The federal government’s Bureau of Labor Data (BLS) released brand new price inflation data today, and based on the report, price inflation throughout the month decelerated slightly, arriving at the lowest year-over-year increase in fifteen months.
According to the BLS, Consumer Price Index (CPI) inflation rose 6. 5% year over year during December, before seasonal adjusting. That’s the twenty-second month inside a row of inflation over the Fed’s arbitrary 2-percent inflation target, and it’s fifteen months in a row associated with price inflation above six. 0 percent.
Month-over-month inflation fell the first time in five months, with all the CPI falling 0. 1 percent from November to December.
December’s year-over-year growth rate will be down from June’s high of 9. 1 percent, which was the highest price inflation rate considering that 1981. But December’s development rate still keeps cost inflation above growth prices seen in any month during the 1990s, 2000s, or 2010s. December’s increase was the fourteenth-largest increase in forty years.
The ongoing price raises largely reflect price development in food, energy, transportation, and shelter. Gasoline plus used car prices, on the other hand, fell and mitigated the overall CPI increase. Nevertheless, the prices of essentials overall saw big increases in December over the previous year.
For example , “ food at home” — i. e., grocery store bills— was up 10. 4 percent in December on the previous year. Energy services were up 15. 6 percent. Shelter was up by 7. 5 percent.
As of December there is, as of yet, no sign of price growth in protection slowing down. Last month, shelter prices increased by 7. 1 percent , plus YoY growth only continued into December having right now reached the highest growth rate since July of 1982. Month-over-month growth in shelter costs also continues to be among the largest we’ve observed in 40 years. In the seasonally modified numbers, shelter prices rose 0. 8 percent, the highest since June 1982:
In the mean time, so-called core inflation— CPI growth minus food and energy— has barely fallen from the forty-year high reached within September. In December, year-over-year growth in core inflation has been 5. 7 percent. Which down slightly from November’s growth rate of five. 9 percent. September’s year-over-year increase of 6. 7 percent was the largest recorded since August 1982. Month-over-month growth in this measure was positive from November to December as well, along with prices minus food and energy growing 0. 3 percent. Month-to-month growth has been beneficial in every month since Might 2020.
Meanwhile, December was yet another month of decreasing real wages, and was the twenty-first month in a row during which growth in average by the hour earnings failed to keep up with CPI inflation. According to new employment data launched last week by the BLS , hourly earnings had improved 4. 6 percent in December year, over year, meaning wage growth fell behind inflation:
Celebrate a 6. 5 Percent Inflation Rate?
Many commentators and politicians were quick to claim the slowing CPI inflation numbers show that inflation is “ falling. ” The Biden Administration, for example , repeatedly uses variations in the words “ fall” or even “ falling” to describe price inflation. Naturally , this is only true in the event that one ignores the year-over-year change, and certainly ignores the larger trend in which the CPI is up 15 percent given that December of 2019. For all those whose wages have increased by 15 percent over the past three years, they may be maintaining (barely) with rising costs. But as for people upon fixed incomes? Forget about this. Moreover, ordinary people trying to build-up savings are taking a financial beating. Since December 2019, the particular Dow Jones has gone upward 14 percent. Savvy investors are perhaps managing to almost keep up with price inflation. But more mundane purchases are very much in the gap, and savings in financial savings accounts is rapidly losing value. Savers are generating 4 percent on some of the best high-yield accounts, yet regular savings accounts continue to be paying under 1 percent. With price inflation at 6. 5 percent, savers are simply losing money. Moreover, retirement accounts and other investments that are greatly invested in Treasurys are losing money. The ten-year bond are at a measly 3. four percent. For most of 2022— when CPI inflation had been coming in from 7 in order to 9 percent— the ten-year bond was often below 3 or more percent. In other words, savings and investment funds held simply by regular people— people who aren’t afford the risky process of “ chasing yield” — are shrinking.
Will the Fed Revolves to Lowering Interest Rates Again?
Nonetheless, a few corners of Wall Street are optimistic that a minor slowing inflation is an extremely good sign. This isn’t due to the fact Wall Street is especially in opposition to price inflation, but due to the fact Wall Street interprets slowing inflation as a sign the particular Federal Reserve will soon force down interest rates once again if inflation is seen as ebbing. Wall Street has become therefore addicted to easy money in the Fed now that nearly all economic news is interpreted with the lens of “ what will the Fed do following? ” (There’s very little real capitalism going on among the financial classes in America in 2022. )
The slowing in CPI inflation, of course , has been partly due to the fact the Federal Reserve has eased up on quantitative easing and other efforts to drive down interest rates. That means much less new money entering the economy, but both Wall Street and Washington hate that. Yet, price pumpiing is bad enough that the Fed worries it could step out of hand, which would lead to politics instability. So , even with present numbers showing a slight slowing in price inflation, a lot of investors remained unconvinced the Given is about to turn back to an easy-money regime. After all, even as we note above, food, protection, and energy, are all still rising at brisk prices. Biden was quick to pay attention to gasoline in his public comments, but the fact that gasoline offers fallen to the non-bargain price of around $3. 30 a gallon is hardly a reason to declare inflation discomfort dead or dying.
What really remains to be seen is how fast the Fed will give to pressure from the Wa to push interest rates back down so as to keep payments over the national debt manageable. It easy to see why the us government needs a return to a low-interest regime. In the 3rd quarter, the particular Federal government’s current expenditures for interest payments rose by 13. 6 %, year over year, that was the largest since 1960 . If that continues, the need to pay interest will pressure Congress to cut back spending on popular programs like Medicare insurance. Thus, current growth within interest payments— fueled by higher interest rates— is a political problem. After all, Our elected representatives and the White House have zero plans to scale back deficit spending, and they need federal government debt at low interest rates to keep the gravy train going at full speed.